What are the barriers to accessing finance for small companies?
Typically, banks seek to control their loans business by adjusting interest rates; however, demand is such in the China market that such manipulations of interest rates lose relevance: countless enterprises are willing to pay interest rates pegged way above standardized norms, but it is of no use: the bank’s analysis is that whatever the enterprises can pay in the way of interest rates is not going to compensate for potential losses if they default and have no strong guarantee or collateral. For the most part, small- and micro-enterprises are not able to furnish collateral big enough or safe enough to reassure the banks; the result is that the banks see small clients only as potential loss-makers. The banks’ traditional loan-delivery mechanisms are not adapted to financing micro-, small- and medium-sized enterprises.
